what is credit and debit ..??plzzz give brief explanation..
Answers
The common usage:
The English word "debit" (originated from debt) is action that means to decrease some amount an (cash/savings etc) account. The word "credit" in English means to add some amount to an (cash/savings etc) account.
Accountancy:
Business transactions are managed with an accounting system. A transaction affects multiple accounts (usually two). Each transaction usually has a debit entry and a credit entry. The accounting system is called double-entry system. For each transaction we need to identify which accounts are affected. Then we decide which one is to be debited and which one is to be credited. Credit and debit are opposite actions.
Then debits are entered on the left side of an account. To debit an account means to enter (write/record) the amount (of transaction) on the left hand side of the affected account.
Credits are entered on the right side of an account. To credit an account means to record that amount on the right hand side of that account.
Be careful with these terms, as credit and debit could both increase the balances, but of accounts of different types.
When a debit is done, that amount is used to pay something. It an amount withdrawn from an account. Then the balance in some of these accounts will increase: Dividends (paid), Expenses, Assets procured etc.
When a credit is done, that amount is like an earning or an amount
received. Probably it increases future liability to pay someone more (later in
future). So the balance in some of the following accounts will increase:
Gains, Income, Revenue, Liability etc.
Example:
When I sell my product/service to a client for a price X, then I write a CREDIT of X in my REVENUE account and record a debit of X in CASH account.
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